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Wednesday, December 23, 2020 – 10:15 AM
UPDATED Wednesday, December 23, 2020 – 6:15 pm
KEPPEL Land is selling its 100 percent stake in Keppel Bay Tower to Keppel Reit (real estate investment trust), based on an agreed property value of S $ 657.2 million, including rental support of up to 3 , 2 million Singaporean dollars, according to exchange documents on Wednesday morning.
The agreed property value took into account two independent valuations by JLL and Cushman & Wakefield and represents about 1.2% and 1.5% discount on the respective rental-supported valuations as of November 30.
Keppel Reit’s total acquisition cost is estimated to be around S $ 667 million, after factoring in fees and other costs.
The Keppel Reit manager said he intends to finance the acquisition with the net proceeds of a capital fundraiser that is intended to comprise a private placement and a S $ 70 million reduction from an existing revolving credit facility of five years, and new credit lines of up to a total amount of S $ 330 million comprising two six-year credit lines.
The size and timing of the equity fundraising have not been determined, the Keppel Reit manager said, adding that more details, including the debt-to-equity ratio, will be announced at an appropriate time.
“The proposed cumulative acquisition of Keppel Bay Tower is part of our ongoing portfolio optimization efforts to improve Reit distributions and improve total unit return,” said Paul Tham, CEO of Reit’s managing director.
“The strategic addition of a quality office property outside the CBD like Keppel Bay Tower, with its established tenant base, complements our existing portfolio and increases revenue resilience.”
The initial property return on net income is estimated to be 4%, taking into account rental support.
Following the divestment, Keppel Land, which is the ownership arm of Keppel Corporation and sponsor of Keppel Reit, will remain the property manager for Keppel Bay Tower.
The profit resulting from this transaction for Keppel Corp is estimated at approximately $ 14.6 million, including the fair value adjustment that will be recognized in the second half of 2020. Keppel Corp expects to receive net proceeds of approximately S $ 597 million from the divestiture. proposal, after deducting costs and expenses. . The net proceeds will be used for the group’s working capital and / or business expansions.
“The divestment of Keppel Bay Tower is in line with Keppel’s Vision 2030 and will allow the Keppel Group to unlock capital from Keppel Bay Tower and reallocate it to pursue new growth opportunities,” said Ng Ooi Hooi, President (Singapore) at Keppel Land.
“Through Keppel Land’s interest in Keppel Reit, Keppel Land will continue to enjoy the rental income and potential capital appreciation of Keppel Bay Tower, as well as benefit from Reit’s growth.”
Keppel Bay Tower is a Grade A office building located on the Keppel Bay Waterfront Precinct in the HarbourFront area of Singapore. It has a total net leasable area of approximately 386,600 square feet and comprises an 18-story tower block and a six-story podium block. At the end of September 2020, the committed occupancy was 99.2%.
As the acquisition is a stakeholder transaction, it will be subject to approval by Keppel Reit’s shareholders at an extraordinary general meeting expected to be held in the first quarter of 2021. Once approved, the acquisition is expected to be completed. complete in the second quarter of 2021.
In a separate exchange filing on Wednesday, Keppel Corp said that Keppel Offshore & Marine (Keppel O&M) has successfully fulfilled its obligations under the US Deferred Prosecution Agreement (DPA) entered into with the US Department of Justice. In December 2017 and that the DPA has been successfully completed.
This was in connection with a global resolution with the criminal authorities in the United States, Brazil, and Singapore regarding corrupt payments made by a former agent in Brazil.
As part of the fines payable under the global resolution, around US $ 52.8 million was paid to the Corrupt Practices Investigation Office (CPIB) in Singapore within three years from the date of a conditional warning. , less any penalties that Keppel O&M may pay to the specified Brazilians. authorities.
Discussions with the specified Brazilian authorities continue, and CPIB agreed to extend this three-year period for another 12 months until December 22, 2021, Keppel Corp said, noting that the sum has been included in accrued expenses since the fiscal year. 2017.
Shares of Keppel Corp were trading at S $ 5.29 as of 9:57 a.m. Wednesday, down 0.2 percent or S $ 0.01. Keppel Reit units were down 2.7 percent or S $ 0.03 to S $ 1.08.
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